It was meant to be a breakthrough in public-private partnerships (PPPs) in urban transport. Instead, the high-speed metro line that connects Delhi's new airport to the city centre has broken down, with each partner accusing the other of neglect. Even as their war of words intensifies, as the cost of conflict is tabulated, as the future of the line is evaluated, the next break down could well be in the ties between Reliance Infrastructure and Delhi Metro Rail Corporation (DMRC), which have turned testy.

According to a DMRC official who did not want to be identified, the two partners have exchanged about 160 letters in the past three months—on faulty construction, on broken parts, on fixing responsibility, on financial relief, on penalties and, most recently, on shareholding patterns.

This is not routine communication, but memos that document differences or missives that make a point on issues, many of which pit DMRC and Reliance—the public and private partners, respectively—against each other. For example, Reliance says DMRC handed it a faulty construction in the first place; DMRC says Reliance did not do checks as scheduled.

Reliance says it first informed DMRC about the problems this March; DMRC says May. Reliance says DMRC misled it on passenger numbers; DMRC says it was naive of Reliance not to do its own assessment... Such is the pitch that it raises fears the two partners are a step away from initiating separation. Reliance was losing about Rs 1 crore a day, before the line was shut down on July 8 for repairs. Maintaining the group remains interested in PPPs, Sumit Banerjee, CEO of Reliance Infrastructure, says: "The risks of the business should be shared between the partners.

There should be equitable accountability of the public partner." Counters Akhileshwar Sahay, strategic advisor at DMRC and the person designated by the organisation to speak on the issue: "We have the right to terminate the agreement. They (Reliance) weren't able to market the metro.

They entered a business with two eyes closed." Passenger traffic, which was to bring in 25% of Reliance's revenues, was half the 40,000 daily estimate on which its business case rested. Real estate is supposed to deliver the other 75%, but Reliance has leased out only 5% of the space it has. Besides the future of this partnership, also at stake is the future of PPPs in urban transport.

E Sreedharan, the doyen of metro in India, has never been for PPPs in urban transport. Sreedharan, who was the managing director of DMRC when the Delhi airport metro project was conceived, declined comment. But in giving justification for his silence, Sreedharan, who has since retired but remains a principal advisor to DMRC, gave an inkling of what he thought.

He emailed: "Since your queries are all centred around the Delhi Metro Airport line and since the concessionaire (Reliance) has raised many disputes and is trying to wriggle out of the concessionaire agreement, I would not like to express my views at this stage, lest it may complicate the disputes between the two parties further."

Having run up accumulated losses of Rs 341 crore, Reliance has asked DMRC for a breather on payments. Alongside, it has tweaked its equity and shareholding pattern in the entity running the project, adding to the hostilities with DMRC that are as old as the project itself.

Public-Private Pains

The seeds of friction were sown when the project was being conceived. The government proposed a PPP in metro rail to test the appetite and feasibility of private capital. DMRC, which was successfully operating the metro in the National Capital Region, was told to partner a private player, even though it was willing to go ahead on its own. In December 2006, DMRC called for bids from private players to operate the line and lease out land in and around the train stations for 30 years.

The Anil Dhirubhai Ambani Group (ADAG) won the bid, in partnership with Spanish rail-equipment manufacturer Construcciones y Auxiliar de Ferrocarriles SA (CAF). ADAG would pay DMRC a share of its revenues: ranging from 1% in year one of operations to a maximum of 5% beginning year 16. It would also pay it an annual 'concession fee', starting with Rs 51 crore in year one and increasing by 5% every year. By comparison, Larsen & Toubro, the second-lowest bidder, asked the government either for a grant of Rs 346 crore a year or a 25-year, interestfree loan of Rs 1,440 crore. As PPP projects went, the Delhi airport metro was unique not just in the metro rail space, but across sectors.